Unbanked and underbanked populations typically have access to a limited financial services portfolio and may thus typically rely instead on informal financial practices such as lending among friends, family and neighbors. Another common practice involves selling goods in exchange for a promise to pay later, e.g., in a month or more, when the customer is expected to have the money to settle the debt.
In one example of such a transaction assume the following succession of events. Reference can also be made to FIG. 1.
A. A merchant sells goods or services to a customer.
B. The merchant records the purchase event, typically the customer's name, the amount to be repaid, and the date.
C. The merchant waits for the customer to return on the agreed date to pay the debt.
D. The merchant removes or otherwise marks as paid the purchase record.
E. The merchant uses the received money to buy more goods to restock the merchant's inventory.
However, if the merchant needs funds to buy more goods and supplies before the agreed-upon date to pay the debt the merchant may need to request a loan from a bank. A problem that then arises for the bank relates to the inherent difficulties in analyzing the risk of an unbanked and underbanked population. In that a significant portion of the unbanked and underbanked population do not have established credit and transaction history data, it becomes difficult for banks to evaluate their risk prior to entering into a transaction.
In view of the foregoing it should be apparent that merchants and others serving an unbanked and underbanked population could benefit from an improved financial service paradigm that better accommodates their traditional cash flow and financial practices.